Companies & Industries

Why Wal-Mart Really Needs Food Stamps

Wal-Mart (WMT) is facing some tough times. The world’s largest retailer on Thursday announced its third straight quarter of falling same-store sales, an important measure of any chain’s well-being.

There are lots of reasons why fewer shoppers went to Walmart, dragging the metric down 0.3 percent this time, and those who turned up spent less. Some customers seem to be taking their business to dollar stores in search of even lower everyday prices. Some are frustrated because Walmart doesn’t always have enough workers to keep its shelves well stocked. Others are feeling the effects of payroll tax increases. Consumers are also hesitant to buy what they don’t necessarily need because they’re still anxious about the economy and their jobs. And then there was the government shutdown.

It doesn’t look as if things are going to get much better for Walmart—or its shoppers—soon. Even as the retailer begins what it calls its “best holiday plan ever,” it also said that it expects same-store sales over the season to be “relatively flat.”

“We have robust plans in place to help our customers save money this holiday season,” Bill Simon, the head of Walmart U.S., said in a recorded call (PDF). “While we’re somewhat encouraged by the momentum coming out of the third quarter, we know the customer continues to be challenged by ongoing uncertainty around healthcare costs, the payroll tax increase and recent SNAP reductions.”

Let’s take a minute to consider the last bit of Simon’s statement. SNAP is the Supplemental Nutrition Assistance Program—otherwise known as food stamps—covering some 47 million people as of July. On Nov. 1, food stamp benefits were reduced after the expiration of a temporary increase put in place by Congress in 2009. More cuts could come as Washington looks for ways to shrink the federal budget.

Walmart, it turns out, is a big beneficiary of the food-stamp program. Almost half of all redemptions are in big-box super-centers such as Walmart and Target (TGT), according to Bloomberg Industries; in total, Americans spent about $73 billion worth of food stamps last year. If Walmart received one-quarter of that, the amount would come to about $18 billion. Walmart didn’t respond to a request for comment.

Just a month ago, Walmart didn’t seem worried about reductions in food stamps; in fact, the giant retailer figured it could benefit. “Price will become more important” as food-stamp recipients have to buy more food with their own money, Simon told analysts on Oct. 15. “And when price is more important, we’re more relevant. And so, we’re preparing for that and planning for that. How it turns out, we’ll keep you advised.”